The Office for Budget Responsibility (OBR), the Government’s economic watchdog, have forecast that the government’s building efforts will permanently boost GDP by two per cent.
In today’s [26th March] Spring Statement, Chancellor Rachel Reeves said that her government’s building programme will add £6.8 billion to the economy, and allow her to meet her fiscal rules two years early.
0.2 per cent is the biggest positive growth effect the OBR has ever forecasted for a zero-cost policy.
The most recent housebuilding forecast represents an increase of 137,000 relative to the OBR’s previous report published in October 2024.
Increases in housebuilding numbers are mainly driven by the changes to the National Planning Policy Framework (NPFF) announced in December 2024.
Changes included giving mandatory home delivery targets to councils, providing £100m to speed up the planning process, and ordering councils to identify “grey belt” suitable for development.
In 2025/26, the UK’s housing stock is set to increase by 192,000 – the lowest figure since 2013/14. The low levels of development are driven by higher interest rates and the stricter regulatory standards introduced in June 2023.
The OBR expects a recovery in housebuilding, with net additions predicted to reach 305,000 a year by 2029/30.
While projections remain below the government’s cumulative target of 1.5 million by the end of 2025, the forecasts do not take into account reforms including the Planning and Infrastructure Bill, or the new Affordable Homes programme.
It is estimated that the UK has a housing shortfall of between 3 and 4.3 million homes.
The previous Conservative Government had a target of building 300,000 homes a year, but peaked at 243,000 in 2019/20.
The last time the UK built more than 250,000 in a single year was in the 1980s.
The Spring Statement also included cuts to welfare payments and the announcment that the estimated rate of economic growth for 2025 has been downgraded from 2 per cent to 1 per cent.
Despite falling this month, the rate of inflation remains above the target level of 2 per cent.
In response to the Spring Statement, Shadow Chancellor Mel Stride said: “[Rachel Reeves] has tanked the economy… because of her choices.”
Stride criticised the previous increases in Employer’s National Insurance contributions and the introduction of VAT on private school fees for their downward effects on economic growth.
He said that Reeves’ decisions “destroyed livelihoods” and “clobbered” businesses.
